OPEC, Allies Maintain Modest Boosting Of Oil Output

In this file photo taken on November 29, 2016, the logo of OPEC is pictured at the OPEC headquarters on the eve of the 171th meeting of the Organization of the Petroleum Exporting Countries in Vienna, Austria. JOE KLAMAR / AFP
In this file photo taken on November 29, 2016, the logo of OPEC is pictured at the OPEC headquarters on the eve of the 171th meeting of the Organization of the Petroleum Exporting Countries in Vienna, Austria. JOE KLAMAR / AFP

 

OPEC and its allies decided on Tuesday to maintain their policy of modestly boosting oil output next month as the rapidly spreading Omicron variant has so far not heavily hit demand.

The OPEC+ grouping, including top producers Saudi Arabia and Russia, has resisted US pressure for a wider opening of the taps in response to high energy prices fuelling a surge in inflation across the world.

The 13 members of the Organization of the Petroleum Exporting Countries (OPEC) and their 10 allies drastically slashed output in 2020 as the pandemic wreaked havoc with demand.

READ ALSO: Kuwait’s Al-Ghais To Succeed Nigeria’s Barkindo As OPEC Secretary-General

Last year they decided to step it up again gradually as prices recovered, while reviewing the situation every month.

After a short videoconference meeting on Tuesday, the group said it had agreed to raise output by 400,000 barrels per day in February, the same increase as in previous months.

Since demand has barely been affected by Omicron, “we have to fulfil the obligations OPEC+ has set itself in relation to boosting production, Russian Deputy Prime Minister Alexander Novak, who is responsible for energy policy, told Rossiya 24 TV.

“The decision was widely expected, and oil prices barely moved on the news,” said Caroline Bain, chief commodities economist at Capital Economics.

The price of Brent, Europe’s benchmark oil contract, rose slightly to $79.60 on the news of OPEC+’s decision, buoyed by the organisation’s optimistic outlook for demand.

Hopes for normality

The club’s members had approved a similar hike at their December meeting despite the emergence of Omicron, which  had caused prices to fall as markets fretted over the Covid variant’s potential impact on the global economy.

The December decision earned the thanks of the White House, nervous of the effect of rising prices at American petrol stations, but it did not prevent crude prices from recovering considerably from their previous slump.

OPEC analysts told the group on Monday that Omicron would have a moderate impact on demand and the rise in price is expected to continue in 2022.

While the new Covid variant is spreading like wildfire around the world, it appears to be far less severe than initially feared, raising hopes that the pandemic could be overcome and life return to a little more normality.

OPEC+’s next meeting has been fixed for February 2, when members will take stock of the fast-moving developments in the pandemic.

On the eve of Tuesday’s meeting, OPEC named Kuwaiti oil executive Haitham al-Ghais to succeed Secretary-General Mohammad Barkindo on August 1.

Al-Ghais, who was Kuwait’s OPEC governor from 2017 to June 2021, is a deputy managing director of the Kuwait Petroleum Corporation (KPC).

Iran exports

While OPEC+ countries have been gradually increasing output again since last year, analysts note some countries, such as Nigeria and Angola, have been struggling to lift production.

“Important here is that Russia did not lift production in December which could be a sign that they are getting closer to their capacity,” SEB chief commodities analyst Bjarne Schieldrop said.

For Russia, Novak said the rise announced on Tuesday “means that from now until February we will have reversed around 85 percent of cuts in production” made in spring 2020, taking the country’s output 1.7 million bpd higher as compared with that period.

Another oil heavyweight, Iran, has seen its exports limited by US sanctions.

Talks to revive an international deal, which curbed Iran’s nuclear activities in exchange for sanctions relief, are underway in Vienna.

They have dragged on since last year but negotiators are pushing to conclude the talks to get the landmark 2015 agreement back on track.

It was thrown into disarray in 2018 when the US withdrew from the accord.

Kuwait’s Al-Ghais To Succeed Nigeria’s Barkindo As OPEC Secretary-General

Haitham al-Ghais, Kuwait’s then-OPEC governor, looks on during a press conference at the end of the Organisation of Arab Petroleum Exporting Countries (OAPEC) meeting in Kuwait City on December 23, 2018. Yasser Al-Zayyat / AFP

 

Top oil-producing countries on Monday picked Kuwaiti oil executive Haitham al-Ghais as the next Secretary-General of the Organization of the Petroleum Exporting Countries (OPEC).

He will replace Nigeria’s Mohammed Barkindo, who took over the helm of the organisation in 2016 and led it for two terms.

Al-Ghais, who was Kuwait’s OPEC governor from 2017 to June 2021, serves as a Deputy Managing Director of the Kuwait Petroleum Corporation (KPC).

His decades of experience in the industry include stints in Beijing and London for the state oil corporation.

Read Also: Notorious Bandit Leader, Turji, Frees Over 50 Victims Amidst Military Offensive

OPEC said in a statement that al-Ghais was appointed by acclamation and will take up his three-year post on August 1.

During Barkindo’s tenure, the group drastically slashed oil output in 2020 as the coronavirus pandemic hit global markets.

Last year, OPEC and 10 allies including Russia began to gradually open the tabs again, and prices have bounced back.

Outgoing OPEC Secretary-General Mohammed Barkindo

 

The Vienna-based organisation comprises 13 members led by Saudi Arabia which fix output to control prices along with the 10 other countries in a grouping dubbed OPEC+.

So far OPEC+ has resisted pressure by top oil consuming nations, such as the United States, to more aggressively boost production.

A monthly OPEC+ meeting of all 23 members via videoconference on Tuesday is expected to continue to stay the course and modestly boost output.

The OPEC general secretary has no executive power, but is the public figure of the organisation, which represents countries with divergent interests, such as Saudi Arabia and Iran.

The group in its statement credited Barkindo with being “instrumental in expanding OPEC’s historical efforts to support sustainable oil market stability through enhanced dialogue and cooperation with many energy stakeholders” in the face of the pandemic.

OPEC+ To Increase Output In January Despite Omicron Jitters

An oil pumpjack operates in Signal Hill, south of Los Angeles, California on April 21, 2020. Frederic J. BROWN / AFP.

 

Major oil producers decided Thursday to keep raising output levels in January, despite the Omicron coronavirus variant raising fresh questions over demand.

The OPEC+ alliance led by Saudi Arabia and Russia had so far resisted US-led pressure to significantly boost output to rein in surging energy prices.

Observers had expected the club to opt for a freeze in production for January, particularly after the emergence of the Omicron variant sent countries rushing to impose new travel curbs and mull other measures that could dampen demand and hurt oil prices.

READ ALSO: Brazil’s Economy Goes Into Recession

But after meeting for a little over an hour on Thursday afternoon via video conference, the 13 members of the Vienna-based Organization of Petroleum Exporting Countries (OPEC) and their 10 allies decided to stick with a modest increase in output of 400,000 barrels per day every month, as they have been doing since May.

The OPEC+ meeting came a week after the United States and to a lesser extent China, India and Japan decided to dip into their strategic reserves to help bring down crude prices, after a price surge that has undermined economic recovery.

“We suspect that the US-led co-ordinated release of oil reserves… was one reason why OPEC+ decided to push ahead with their plan to raise oil output,” said commodities economist Edward Gardner from Capital Economics, noting that “the group might not want to provoke further action from the large oil consumers”.

“Rather surprisingly, OPEC+ decided to go ahead with the increase, sending prices back into the red”, said Michael Hewson, chief market analyst at CMC Markets.

The decision did indeed send prices for the two benchmark oil contracts, WTI and Brent, tumbling to their lowest levels since late August at $62 and $65 per barrel respectively.

They then recovered to nearly $67 and $70, both gains on the day, but were still some way below the highs recorded in late October.

The United States welcomed the decision by OPEC+ members to increase output.

“Together with our recent coordinated release from the (strategic petroleum reserves), we believe this should help facilitate the global economic recovery,” said White House spokeswoman Jen Psaki.

Russian Deputy Prime Minister Alexander Novak told news agencies that the decision “was explained by the fact that the market is stable and that demand is recovering”.

However, he acknowledged that there was “a lot of uncertainty” linked to the Omicron variant and said that “we will — along with other countries — of course monitor the situation to see how it affects travel”.

Ann-Louise Hittle, head of oils research at Wood Mackenzie, said that “in a highly uncertain situation, the best option is to stick with the plan. That is exactly what OPEC+ has done today.”

Analysts also noted that Thursday’s meeting had been technically left “in session”, which according to Gardner “appears to be a way of leaving the door open for a change to output quotas before the next meeting in early January”.

‘Steady progress’

In the run-up to the meeting, OPEC and its members had kept markets guessing as to the likely course of action.

At a technical meeting on Wednesday, OPEC Secretary General Mohammed Barkindo had “highlighted… that steady progress has been made on the global economic recovery”, but also “underscored the need to remain attentive to the prevailing uncertainties and shifting conditions, including those related to the new Covid-19 variant Omicron.”

The group’s spare capacity is some 10 times higher than the 400,000 barrels per day that it has been adding to the markets every month.

OPEC+ drastically slashed output last year as the pandemic began to unfold, and virus-related restrictions caused demand to crash.

Another variable the bloc may have to contend with in coming months is the possible return to the market of Iran if talks in Vienna lead to the revival of the 2015 nuclear deal between Tehran and world powers.

Iran’s Foreign Minister Hossein Amir-Abdollahian said Thursday a deal was “within reach if the West shows good will”.

AFP

OPEC+ To Meet As Omicron Sparks Price Turmoil

In this file photo taken on November 29, 2016, the logo of OPEC is pictured at the OPEC headquarters on the eve of the 171th meeting of the Organization of the Petroleum Exporting Countries in Vienna, Austria. JOE KLAMAR / AFP
In this file photo taken on November 29, 2016, the logo of OPEC is pictured at the OPEC headquarters on the eve of the 171th meeting of the Organization of the Petroleum Exporting Countries in Vienna, Austria. JOE KLAMAR / AFP

 

OPEC and the oil cartel’s allies hold a key output meeting on Thursday facing new challenges as the Omicron coronavirus variant has roiled markets and other US-led nations decided to tap their strategic reserves.

The OPEC+ alliance has resisted US-led pressure to step up production to bring down surging energy prices, and the emergence of the new variant has complicated the equation.

The meeting “is shaping up to be one of the most significant since the pandemic demand recovery began, and the key signal will be how much more oil will be added to supply to start the new year,” said Peter McNally, an analyst at the Third Bridge think tank.

The detection of the new variant on Thursday caused crude prices to plunge more than 10 percent, a first since the massive drops of April 2020.

After bouncing back on Monday, oil prices fell again on Tuesday as the head of US pharmaceutical company Moderna warned that current vaccines might be less effective at fending off the Omicron variant.

Carsten Fritsch of Commerzbank said “there is much to suggest that OPEC+ will not initially step up its oil production any further” in an effort to maintain current prices at around $70 a barrel.

OPEC+ countries began slowly boosting output in May.

The group has been adding 400,000 barrels per day to the markets every month, even though its capacity is 10 times higher than that.

The alliance will discuss its output levels for early 2022 at the meeting.

No ‘hasty’ moves

Russian Deputy Prime Minister Alexander Novak, the Kremlin’s oil pointman, warned Monday against any “hasty decisions”, according to Russian news agencies.

A technical meeting was set for Tuesday ahead of the meeting but was postponed to Thursday as experts seek more information on the “current situation”, Novak said.

The conference also comes a week after the United States, China, India and Japan decided to dip into their strategic reserves to help bring down crude prices, after a surge that has undermined economic recovery.

US President Joe Biden called it a “major initiative”, with analysts estimating the injection at between 65 and 80 million barrels, including 50 million from the United States alone.

Oil prices rose despite the move, but they fell after Omicron emerged.

Iran’s possible re-entry into OPEC will be another key element in the OPEC calculus.

Iran was sidelined from OPEC in 2018 when then US president Donald Trump pulled Washington out of the 2015 nuclear accord with the Islamic republic.

After a five-month hiatus, negotiations resumed Monday in Vienna.

While most analysts are pessimistic about the outcome, Bjarne Schieldrop of Swedish bank SEB said: “Getting Iranian oil production and exports back on track is probably the best option for President Joe Biden to ease the current oil market tightness.”

Iran produced nearly four million barrels a day in 2017 — an output that dropped to around two million barrels per day last year.

Oil Prices Surge, Stocks Slump

File Photo of OPEC.

 

Oil prices surged on Monday as OPEC+ kept to its plan to not boost output further, while US and European stocks slumped amid worries over inflation and higher interest rates.

US oil prices soared to their highest level since November 2014 after OPEC and key allies — known as OPEC+ — decided to stick with their planned moderate increase next month, despite the recent surge in prices.

Meanwhile, the price of the main international contract, Brent oil, jumped above $82 a barrel before finishing at $81.26 a barrel.

“The decision by OPEC+ to add the expected 400,000 barrels per day in November triggered a market reaction, as traders are now more boldly coming out from their cautious positions and pricing in a confirmed, tighter supply market,” said Bjornar Tonhaugen, head oil markets at Rystad Energy.

Some economists are worried that sustained oil prices of $80 per barrel could undermine the recovery of the global economy, already under strain from snags in supply chains.

“Producing nations, and namely OPEC+, have to be careful not to allow prices to inflate too much, otherwise we may see an adverse reaction that could negatively impact post-pandemic economic growth,” Tonhaugen said.

Gains in European equities evaporated and US stocks sank as oil prices continued to rise after the OPEC+ announcement.

Analysts pointed to higher yields in government bonds as a drag amid expectations for tightening monetary policy.

The tech-rich Nasdaq led the market lower, slumping 2.1 percent as highflyers such as Amazon and Apple lost around two percent or more.

Facebook sank nearly five precent, weighed down by a major outage on its services as well as heightening scrutiny of its operations after whistleblower Frances Haugen told television news show “60 Minutes” the company repeatedly chose “profit over safety” in managing the omnipresent social media company.

 

Evergrande Worries

In Asia, shares mostly rose, but Hong Kong sank on fears about troubled property giant China Evergrande, which suspended trading in its shares.

The crisis at Evergrande, which is drowning in a sea of debt worth more than $300 billion, has roiled markets in recent weeks on fears that its failure could spill over into the wider Chinese economy and possibly further.

The firm said in a statement that the halt in the trading of its shares was called, “pending the release by the company of an announcement containing inside information about a major transaction”.

The news came as reports said Hopson Development Holdings planned to buy a 51-percent stake in its property services arm.

However, traders remain concerned Evergrande will miss payments on bond obligations, putting it in default.

Hong Kong stocks, already under pressure owing to concerns about China’s crackdown on a range of industries including tech firms and casinos, sank more than two percent.

Tokyo fell 1.1 percent — a sixth straight loss — while Taipei was also in negative territory.

– Key figures around 2050 GMT –

Brent North Sea crude: UP 2.5 percent at $81.26 per barrel

West Texas Intermediate: UP 2.3 percent at $77.62 per barrel

New York – Dow: DOWN 0.9 percent at 34,002.92 (close)

New York – S&P 500: DOWN 1.3 percent at 4,300.46 (close)

New York – Nasdaq: DOWN 2.1 percent at 14,255.48 (close)

London – FTSE 100: DOWN 0.2 percent at 7,011.01 (close)

Frankfurt – DAX: DOWN 0.8 at 15,036.55 (close)

Paris – CAC 40: DOWN 0.6 percent at 6,477.66 (close)

EURO STOXX 50: DOWN 1.0 percent at 3,996.41 (close)

Tokyo – Nikkei 225: DOWN 1.1 percent at 28,444.89 (close)

Hong Kong – Hang Seng Index: DOWN 2.2 percent at 24,036.37 (close)

Shanghai – Composite: Closed for a holiday

Euro/dollar: UP at $1.1623 from $1.1596 at 2100 GMT on Friday

Pound/dollar: UP at $1.3608 from $1.3546

Euro/pound: DOWN at 85.37 pence from 85.60 pence

Dollar/yen: DOWN at 110.93 yen from 111.05 yen.

AFP

Top Oil Producers Agree To Boost Output From August

An oil pumpjack operates in Signal Hill, south of Los Angeles, California on April 21, 2020, a day after oil prices dropped to below zero as the oil industry suffers steep falls in benchmark crudes due to the ongoing global coronavirus pandemic. Frederic J. BROWN / AFP.

 

The world’s leading oil producers agreed on Sunday to continue to modestly boost output from August reaching a compromise after the United Arab Emirates blocked a deal earlier this month.

An OPEC+ meeting decided to raise output by 400,000 barrels per day (bpd) each month from August to help fuel a global economic recovery as the pandemic eases, the group’s Vienna-based secretariat said in a media statement.

The grouping will “assess market developments” in December, it said. The deal also extends a deadline on capping output from April next year to the end of 2022.

Earlier in July, negotiations of OPEC+ members on easing production cuts became deadlocked due to a row between the world’s largest oil exporter Saudi Arabia and neighbour the United Arab Emirates.

Since May, the 23-member grouping, which also includes Russia, had raised oil output bit by bit, after slashing it more than a year ago when the coronavirus pandemic crushed demand.

The aim is to return to pre-pandemic production levels, with the alliance still pumping 5.8 million bpd less than it was before the pandemic.

‘Consensus building’

In a rare challenge to OPEC leader Saudi Arabia, the UAE rejected the proposed deal earlier this month as “unjust”, leading to a stalemate.

But in a compromise, Sunday’s discussions agreed to adjust output quotas next May for the UAE, Iraq, Kuwait, Russia and Saudi Arabia itself, meaning their actual cuts will be less.

Saudi Energy Minister Prince Abdulaziz bin Salman, who chairs the OPEC group, declined to say how the new quotas were decided and beneficiaries chosen, saying it had been part of “consensus building”.

Russian Deputy Prime Minister Alexander Novak told public television channel Rossia 24 that the meeting confirmed “our desire to be constructive and to find a consensus”.

“The pandemic is not yet overcome, but we are seeing that thanks to vaccination all over the world, demand for our production is recovering as is the use of cars and air planes,” he said.

“It is therefore very important for us to fulfil our responsibilities and allow a recovery of the world economy.”

‘Flurry of talks’

Observers had expected a deal.

“A flurry of talks were held on Saturday to try and close the gap,” tweeted Herman Wang, an editor of S&P Global Platts, which specialises in coverage of the energy industry, ahead of the meeting, which lasted just about one hour.

Oil prices — which had already been sliding owing to concerns about the global economy — plummeted in April 2020 as coronavirus spread around the world and battered global consumption, transport and supply chains.

OPEC+ then decided to withdraw 9.7 million bpd from the market and to gradually restore supplies by the end of April 2022 — a deadline that has now been extended.

Benchmark oil prices rebounded as a result and have reached two-and-a-half-year highs. The main international oil contracts have been trading around $75 per barrel.

Economic rivalry was at the heart of the feud between OPEC members as the Gulf states try to cash in on their vast oil reserves as they face the beginning of the end of the oil era.

Disagreements between Saudi Arabia and UAE — once inseparable allies — are usually resolved behind palace walls and rarely spill into the open.

Ministers from OPEC+ countries have gathered frequently since the spread of the new coronavirus to assess the market with the next meeting scheduled for September 1, according to Sunday’s statement.

AFP

Major Oil Producers Seeking Output Boost To Meet On Sunday

OPEC

 

 

Major oil producers seeking to boost output will meet on Sunday, OPEC said, after negotiations earlier this month became deadlocked over plans to gradually ease production cuts.

The OPEC+ grouping, which includes Saudi Arabia and Russia, will meet via videoconference at 1000 GMT on Sunday, the Vienna-based OPEC Secretariat said in a statement.

The group’s 23 members cancelled a meeting on July 5 that was supposed to overcome an impasse over crude output levels.

Since May, the group has raised oil output bit by bit, after slashing it more than a year ago when the coronavirus pandemic crushed demand.

At stake is a proposal that would see the world’s leading oil producers raise output by 400,000 barrels per day (bpd) each month from August to December.

That would add two million bpd to markets by the end of the year, helping to fuel a global economic recovery as the coronavirus pandemic eases.

A further proposal seeks to extend a deadline on capping output from April 2022 to the end of 2022.

But holding out against the new deal was the United Arab Emirates, which criticised the terms of the extension as unjust.

Oil prices, which had already been sliding owing to concerns about the global economy, plummeted in April 2020 as coronavirus spread around the world and battered global consumption, transport and supply chains.

OPEC+ decided to withdraw 9.7 million bpd from the market and to gradually restore supplies by the end of April 2022. Benchmark oil prices rebounded as a result.

AFP

Oil Demand Surges, Market Set For Deficit And Volatility – IEA

 

 

Oil demand surged last month as rising vaccination rates helped underpin robust economic activity, but with OPEC+ nations pumping less than needed prices are set to be volatile until it reaches a deal to raise output, the IEA warned on Tuesday.

A meeting of OPEC+ nations earlier this month was deadlocked over plans to gradually ease production cuts, imposed to reverse the plunge in oil prices at the start of the coronavirus pandemic as demand tumbled.

But demand is rebounding, with the International Energy Agency estimating it surged by an estimated 3.2 million barrels per day (mbd) last month, which is more than a third of the overall drop in demand last year.

The IEA expects oil demand to rise by another 3.3 mbd in the three months from July. That is more than twice as large as the seasonal increase registered during the same period in 2019, which the IEA said is a result of easing Covid restrictions and increasing vaccination.

While OPEC+ had been set to gradually raise oil output, the stalemate means production is frozen at current levels until an agreement is found.

“Oil prices reacted sharply to the OPEC+ impasse last week, eyeing the prospect of a deepening supply deficit if a deal cannot be reached,” the IEA said in its latest monthly report.

The main international oil contracts have been trading around $75 per barrel, and some analysts see a spike to $100 as possible.

But there is another possibility: the overall OPEC+ deal breaks down and producers open the taps and try to gain market shares, which would likely lead to prices crashing.

“At the same time, the possibility of a market share battle, even if remote, is hanging over markets, as is the potential for high fuel prices to stoke inflation and damage a fragile economic recovery,” said the IEA.

Investors have been worried that a surge in inflation could force central banks to raise their ultra-low interest rates, thus removing one of the main supports for the economic recovery.

The IEA said that absent increased production by OPEC+ nations the market for crude is set to tighten, with additional stocks built up during the pandemic already gone and reserves running below the long-term average in industrialised nations.

Furthermore, it forecasts the biggest draw upon stocks in at least a decade will happen this quarter as OPEC+ pumps nearly 2 mbd less than market demand. The gap will rise to 3.2 mbd in the final three months of the year.

“Oil markets are likely to remain volatile until there is clarity on OPEC+ production policy,” the IEA warned.

It also noted that a spike in prices would not be in the long-term interest of oil producers.

“While prices at these levels could increase the pace of electrification of the transport sector and help accelerate energy transitions, they could also put a drag on the economic recovery, particularly in emerging and developing countries,” the IEA report said.

While the agency, which advises oil-consuming nations, foresees oil demand recovering along with the global economy, it doesn’t discount the pandemic continuing to weigh upon the market.

“Covid-19 remains a significant threat to oil demand growth in the near- to medium-term, in particular in the non-OECD.”

Emerging nations not in the OECD group of advanced nations — such as China and India — were responsible for much of the growth in the global economy before the pandemic.

OPEC+ Expected To Move To Cool Overheating Oil Market

In this file photo taken on November 29, 2016, the logo of OPEC is pictured at the OPEC headquarters on the eve of the 171th meeting of the Organization of the Petroleum Exporting Countries in Vienna, Austria. JOE KLAMAR / AFP
In this file photo taken on November 29, 2016, the logo of OPEC is pictured at the OPEC headquarters on the eve of the 171th meeting of the Organization of the Petroleum Exporting Countries in Vienna, Austria. JOE KLAMAR / AFP

 

 

 

The OPEC+ group of oil-producing countries will meet on Thursday and are expected to agree to boost production in August in order to meet demand and dampen recent price rises.

While improvement in demand drove the group’s most recent rises in production, now price levels will also be a guiding force behind the club’s decisions.

After demand dropped when the coronavirus pandemic broke out last year and crude prices briefly turned negative, the club led by Saudi Arabia and Russia imposed sharp production cuts in order to raise prices.

The 13 members of OPEC and their 10 allies in the OPEC+ grouping were rewarded by seeing prices for the two contracts of reference, Brent and WTI, recover to around $75 per barrel, levels not seen since October 2018.

However that strategy has worked almost too well and the group is currently following a policy of cautiously turning the taps back on.

– ‘Rising pressures’ –
While on the face of it buoyant prices are a boon for producers — and some of them will be pushing to increase output to cash in — there are also risks.

Russia is expected to favour increasing output, as it has done at several recent OPEC+ meetings.

Moscow “may be more inclined to support a production increase in order to ensure a higher market share while limiting the risk of rising non-OPEC production,” according to Ole Hansen from Saxobank.

“Pressure will likely not only come from within the group, but there will also be growing calls from key consumers to cool the market down, as countries come out of the other side of Covid-19 lockdowns,” says Warren Patterson of ING bank.

India is a notable example. The world’s third-largest consumer of crude has been hit by a vicious coronavirus wave in recent months and has urged OPEC+ “to phase out crude output cuts to temper rising inflationary pressures”, noted Stephen Brennock from PVM.

“If prices remain this high, this will eat into consumers’ disposable incomes and potentially choke economic growth, which, over time, will weigh on crude prices,” explained Fawad Razaqzada of Thinkmarkets.

The OPEC+ states have left themselves soom room for manoeuvre as they are currently still planning to leave 5.8 million barrels per day (bpd) of crude in the ground over the month of July that they could easily extract and sell.

Most investors are currently expecting a modest rise of some 500,000 bpd over the month of August.

But OPEC+ always has the capacity to surprise.

– ‘Travel intensive summer’ –
The outlook for crude demand has been steadily improving in recent months.

In its last report in mid-June, the International Energy Agency (IEA) forecast that global demand would outstrip pre-pandemic levels by the end of 2022.

Jeffrey Halley of Oanda noted that demand will be boosted as “Americans embrace a travel intensive summer” on cars, planes, and cruises, as well as due to the fact that “the global vaccination rollout is improving”.

As ever in recent months, the cartel will have to pay attention to diplomatic developments relating to one of its members in particular — Iran.

If current negotiations on a US return to the 2015 Iran nuclear deal are successful, the country may be able to resume exporting oil at levels prior to 2018, when former US President Donald Trump dramatically withdrew from the deal and imposed sanctions.

However, this would be unlikely to affect the market until later in the year and there are plenty of other factors at play.

The spread of the highly contagious Delta variant of the coronavirus has led to fresh restrictions being imposed in Australia, South Africa and Thailand.

Since December the OPEC+ countries have been meeting every month in order to calibrate their strategy as closely as possible to the latest developments.

OPEC Sees Rising Oil Demand As It Plans To Open Taps

In this file photo taken on November 29, 2016, the logo of OPEC is pictured at the OPEC headquarters on the eve of the 171th meeting of the Organization of the Petroleum Exporting Countries in Vienna, Austria. JOE KLAMAR / AFP
In this file photo taken on November 29, 2016, the logo of OPEC is pictured at the OPEC headquarters on the eve of the 171th meeting of the Organization of the Petroleum Exporting Countries in Vienna, Austria. JOE KLAMAR / AFP

 

 

OPEC upgraded its expectations for global oil demand growth in 2021 Tuesday on expectations of a growth rebound, as the oil-producing countries’ organisation plans to lift output in the months ahead.

The monthly report’s forecast of a year-on-year increase by six million barrels per day (bpd) was slightly higher than a March prediction, which had already been upgraded.

Such an increase would push global demand to 96.5 million bpd in 2021 after last year’s tumble due to coronavirus restrictions.

“Oil demand in the second half of 2021 is projected to be positively impacted by a stronger economic rebound than assumed last month, supported by stimulus programmes and a further easing of Covid-19 lockdown measures,” OPEC said.

Further cause for optimism later this year came from “an acceleration in the vaccination rollout, largely in the OECD region” — although many developed economies’ performance in the first half has proven sluggish.

Convened under the OPEC+ alliance, which also includes Russia and others, oil producers decided in April to gradually roll back output cuts initially made to shore up prices.

The move was motivated by rising optimism as coronavirus vaccination campaigns picked up steam.

OPEC’s own output grew by 0.2 million bpd last month, to just over 25 million, according to indirect sources cited in the report.

Most of the growth came from a boost to Iranian production.

While Iran remains far short of output levels seen several years ago, it is in talks in Vienna to save an international deal under which the US agreed to lift some sanctions in exchange for curbs on Tehran’s nuclear programme.

OPEC+ Approves Oil Output Increases From May

OPEC+ group is enforcing drastic cuts in production.

 

Oil-producing countries grouped together under the OPEC+ alliance led by Saudi Arabia and Russia agreed on output increases as of next month at a ministerial meeting on Thursday.

A statement from the alliance said that they had agreed to boost output by “no more than 0.5 million” barrels per day (bpd) in May, June and July.

The decision comes despite the expectation ahead of the meeting that the bloc would err on the side of caution.

READ ALSO: Czech Republic’s ‘Wealthiest Man’ Dies In Alaska Helicopter Crash

Addressing reporters after the meeting, Saudi Energy Minister Prince Abdelaziz bin Salman stressed that the decision could still be “tweaked” in the alliance’s monthly meetings.

Before the meeting Prince Abdelaziz said that “the reality remains that the global picture is far from even, and the recovery is far from complete”.

Salman praised the OPEC+ alliance nations for more than fulfilling their commitments to restrain output.

Under its current agreement, the OPEC+ group — made up of the Organization of Petroleum Exporting Countries and its allies including Russia — is enforcing drastic cuts in production, meaning seven million barrels that could be shipped to markets every day are being left in the ground.

In addition, Saudi Arabia has volunteered to cut its own output by one million barrels per day (bpd) to help avoid oversupplying a market suffering from a collapse in demand due to the coronavirus pandemic.

The cuts were aimed at avoiding limited storage capacity being saturated and supporting prices — currently hovering around $60 per barrel.

– Russian optimism –
Market analysts had widely tipped OPEC+ to roll over the production cuts for another month, especially as more nations are experiencing an upswing in Covid cases.

Russia’s Deputy Prime Minister Alexander Novak was more optimistic in his opening comments.

“The evolution of the vaccination campaign is making progress and allows us to look towards the future with optimism, even if, of course, we shouldn’t forget that there remain many uncertainties ahead,” Novak was quoted as saying by Ria Novosti news agency.

“We also note that the economy continues to improve,” he added.

But with Europe returning to lockdown and infections sweeping through India, a country that until the pandemic was an important source of demand growth, experts are now seeing a slower recovery for the crude market.

The International Energy Agency (IEA) reflected this more downbeat outlook in forecasts contained in its last report this month.

It estimated that global demand could take another two years to get back to its pre-crisis levels.

Benchmark crude contracts Brent and WTI were both up nearly 2 percent as the OPEC meeting got underway.

Reps, Ministry Of Finance Disagree Over N2.8bn Payment To OPEC

 

The House of Representatives and the Ministry of Finance on Tuesday disagreed over the procedure for the payment of the sum of N2.8billion to the Organization of Petroleum Exporting Countries (OPEC) in 2017.

The Ministry appeared before the Public Accounts Committee of the House in the ongoing investigative hearing on audit queries by the Auditor-General of the Federation on Ministries Departments and Agencies (MDAs).

Permanent Secretary of the Ministry, Aliyu Ahmed, said the payment was made by the Minister following a memo by OPEC requesting the said amount.

Ahmed said the amount was released from the office of the Accountant General as payment of Nigeria’s contribution to the OPEC fund for international development in 2017.

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Members of the Committee disagreed that the Minister could release such an amount of money without recourse to the President.

Ahmed said payment to international organizations are not guided by the Procurement Act.

He said it was a routine payment and there are hundreds of international organizations, so if they had to resort to the president for every approval, it would be unmanageable and cost more.

He added that this has been the practice over time.

The members vehemently opposed this saying that it had been done over time does not make it right and such payments must be approved by the President.

Chairman of the Committee, Hon Wole Oke, said the approval from the Presidency for such sum would be apt

“Probably an approval from Mr. President from FEC for this large sums of money would have been apt. Your submissions are apt. We know where the money is coming from and where it went to. What we are saying and for the Auditor-General to have raised it, there must have been an issue,” he said.

He ruled that in the future, the Ministry should obtain a memo and presidential approval before taking such amounts.

“For a minister to dip her hands into the Treasury for whatever purposes and take N2.8 billion is not friendly. The expenditure was the right cause. It was a responsibility that we undertook to bear. But just the procedure. Maybe a memo. It was not procedural. Until this act is amended, your Minister is still the chief procurer. What would it cost her to take a memo to FEC to get approval?” he said.